Volatile share prices can create amazing opportunities to buy stocks. It’s times like these that investors look back on for decades.
Investors should never take unnecessary risks in the stock market. But with the way things are right now, they don’t really need to.
What happens next?
At the moment, it’s extremely hard to know what share prices will be doing even a few days from now. A lot depends on the conflict in Iran.
By the time anyone’s managed to record and edit a podcast about what’s going on, it’s changed. And that’s true for those of us who write about stocks too.
Trying to figure out what’s going to happen next is probably a waste of time. But what investors can do is be prepared for different outcomes.
According to Warren Buffett, what creates opportunities is other people doing dumb things (his words). And that happens a lot at times like this.
The stock market is prone to overreacting to the latest news, which can create challenges. But it’s a very good thing for those who want to buy stocks.
What to look for
In some cases, it can be hard to know what the long-term effects of a situation will be. A good example is anti-obesity (GLP-1) drugs.
Usage of these has been growing rapidly. And they’re an obvious threat to a number of food companies.
Assessing that threat accurately, though, is hard. The obvious issue stunting GLP-1 drugs’ potential is that they’re expensive, which limits their availability.
That might change over time, but it’s far from guaranteed. So that makes their long-term impact difficult to assess for investors.
The conflict in Iran, however, looks much clearer. The US has stated it has no interest in a long war, but the market seems to be ignoring this.
Opportunities
The list of stocks that have fallen in the last month is long. But one that stands out is Anglo American (LSE:AAL), which is down 19%.
The firm recently sold off its platinum, coal, and diamond assets to focus on what it sees as long-term opportunities. And this includes copper.
Things were looking good until recently. But the conflict in Iran has created rising energy costs, recession fears, and sulphuric acid shortages.
By contrast, things are much more positive from a long-term perspective. Demand is strong from data centres, electrification, and other major trends.
On top of this, it takes years to open a new copper mine. So unless the war goes on a lot longer than expected, supply should be limited for some time.
Long-term investing
Shares in Anglo American look really interesting to me right now. If the conflict in Iran is brief, it looks as though copper prices should rise.
In that situation, copper miners should do well. And the most attractive companies are ones with the lowest production costs.
Anglo American fits this description. Its assets in Peru are relatively cheap to run and it’s acquired a mine in Chile with even lower costs.
The share price is roughly where it was five years ago. But I think this could be the best time to consider buying in a very long time.
